EXHIBIT 10.7
AMENDED AND RESTATED MANAGEMENT AGREEMENT
AMENDED AND RESTATED MANAGEMENT AGREEMENT (this "Agreement"), dated as
of December 22, 2004, by and between Harvest Partners, Inc. ("Harvest"), a New
York corporation, and Associated Materials Incorporated (the "Company"), a
Delaware corporation.
W I T N E S S E T H:
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WHEREAS, the Company is engaged in the building products industry,
electrical cable manufacturing industry and activities related to each of the
foregoing (the "Business"); and
WHEREAS, the Company is a wholly-owned subsidiary of Associated
Materials Holdings Inc., a Delaware Corporation ("AMHI") and AMHI is a wholly
owned subsidiary of AMH Holdings, Inc., a Delaware corporation ("AMH");
WHEREAS, AMH, Harvest, certain affiliates of Investcorp International,
Inc. (the "Purchasers") and the parties named therein as Sellers have entered
into a Stock Purchase Agreement, dated as of December 5, 2004, pursuant to which
the Purchasers will purchase shares of preferred stock of AMH from the Sellers;
WHEREAS, it is a condition to the closing of the transactions
contemplated by the Stock Purchase Agreement that the parties hereto enter into
this Agreement and a Restructuring Agreement, pursuant to which the holders of
capital stock of AMH have restructured (the "Restructuring") AMH by creating AMH
Holdings II, Inc., a Delaware corporation ("Holdings"), a holding company which
shall own all of the issued and outstanding capital stock of AMH;
WHEREAS, the Company desires that Harvest cause Holdings to designate
representatives with financial and/or management expertise to serve on the Board
of Directors of the Company, and Harvest desires to cause Holdings to designate
such representatives to serve on the Board of Directors of the Company, and that
such representatives render counsel, guidance and directorial assistance to the
Company and/or its subsidiaries and affiliates while serving on the Board of
Directors of the Company (the "Director Services");
WHEREAS, the Company further desires that Harvest provide the Company
and/or its subsidiaries and affiliates with financial advisory and strategic
planning services (the "Harvest Services"), including, without limitation,
various advisory services, consulting, marketing, management, strategic
planning, corporate organization and structure, financial matters in connection
with the operation of the Businesses of the Company, expansion of services,
acquisitions and business opportunities and review and advise the Company
regarding its overall progress, needs and condition;
WHEREAS, the Company and Harvest entered into a Management Agreement,
dated as of April 19, 2002, as amended and restated in its entirety by the
Amended and Restated Management Agreement, dated as of March 4, 2004 (as so
amended and restated, the "Original Agreement"); and
WHEREAS, the parties desire to amend and restated the Original
Agreement as provided herein.
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties, hereto, intending to
be legally bound hereby, agree as follows:
1. Effective Date. This Agreement shall be effective as of the date
first above written (the "Effective Date").
2. Services. Harvest shall cause certain of its employees, directors
or designees (the "Harvest Directors") with financial and/or management
expertise to serve on the Board of Directors of the Company. Harvest shall cause
the Harvest Directors to provide the Director Services and shall devote such
time and attention as is reasonably necessary to provide the Director Services.
Harvest shall also provide the Harvest Services to the Company from time to time
as requested by the Company. The Harvest Services may be rendered both through
the Harvest Directors and directly by Harvest.
3. Compensation. (a) Subject to Sections 3(e) and 4 below, as full
payment for the Director Services and the Harvest Services to be rendered by the
Harvest Directors and Harvest hereunder, the Company shall pay to Harvest a fee
(the "Harvest Fee") equal to the sum of $750,000 (to be adjusted annually in
accordance with the U.S. Consumer Price Index) for each year (such years to
begin on each April 1 and ending on each March 31; provided however that the
initial year shall commence on the Effective Date). Except as otherwise provided
in Section 3(c) below, the Harvest Fee shall be payable in equal quarterly
installments during each year of this Agreement, in advance, on the first day of
each quarterly period commencing on the Effective Date.
(b) In addition to the payment of the Harvest Fee provided for in
Section 3(a) above and in Section 3(c) below, the Company agrees to pay to
Harvest, in consideration of Harvest's efforts to direct the relevant entity to,
and provide advice and strategic planning to the relevant entity in connection
with a Transaction, from time to time, a fee (each, a "Transaction Fee")
concurrently, with, and as a condition to, the closing of (i) a sale, merger,
joint venture formation or other business combination or recapitalization of
Holdings, AMH, AMHI, the Company or one or more of its subsidiaries in
connection with which direct or indirect control of such entity is assumed by an
unaffiliated third party (each, a "Business Combination"), (ii) a sale, lease or
conveyance of all or substantially all of Holdings', AMH's, AMHI's or the
Company's or one or more of its subsidiaries' assets (an "Asset Sale"), (iii)
any offering of Holdings', AMH's, AMHI's or the Company's or one or more of its
subsidiaries capital stock or indebtedness (an "Offering") or (iv) any
declaration of an extraordinary dividend by Holdings, AMH, AMHI or the Company
(an "Extraordinary Dividend" and, together with a Business Combination, an Asset
Sale and an Offering, a "Transaction"). The amount of any Transaction Fee shall
be equal to (x) 1% of the "Transaction Amount" (as defined below) in connection
with a Business Combination, Asset Sale or Extraordinary Dividend, provided,
that, in the case of a Business Combination, Asset Sale or Extraordinary
Dividend, the gross proceeds from such a Business Combination, Asset Sale or, as
the case may be, Extraordinary Dividend generate a cumulative annual eight
percent (8%) compound internal rate of return on the initial investment
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in Holdings by holders of capital stock of the Holdings on the Effective Date;
and (y) 2% of the net proceeds to the relevant entity in connection with an
Offering. "Transaction Amount," as used herein, shall mean the total
consideration (including, without limitation, cash; securities; earnouts (when
and if paid); dividends or other distribution to stockholders; evidences of
indebtedness; other debt instruments, capital leases and preferred securities or
interests remaining on the financial statements, indebtedness, capital leases,
preferred securities or interests and debt and other obligations assumed,
retired or defeased by the purchaser; and any other property or form of
consideration) distributed or directly or indirectly paid, payable or
contributed, for the assets and/or existing and newly issued stock and/or other
ownership interest in connection with the relevant Transaction; provided,
however, that Transaction Amount shall exclude (i) refinanced indebtedness of
the Company and (ii) proceeds from Offerings by Holdings to holders of capital
stock of Holdings on the Effective Date (other than any such holder that is
managed by Harvest). Any securities that form part or all of the Transaction
Amount shall be valued at the quoted public market price or, in the absence of a
quoted market price, the fair value thereof, as determined in good faith by the
Board of Directors of the Company. Any other Transaction Amount that is not
represented by cash shall be valued at the fair value thereof as determined in
good faith by the Board of Directors of the Company. A Transaction Fee shall in
any and all circumstances be payable in cash at the closing of Transaction. In
the event of a recapitalization of any person or entity, a Transaction Amount
shall also include, without duplication, the value of cash, notes, property and
securities distributed to the person's or entity's stockholders or members. The
Transaction Fee will be payable so long as a Transaction is consummated or a
definitive agreement providing for a Transaction is entered into at any time
during the Initial Term or Renewal Term or within the two (2) year period
subsequent to the termination hereof. Notwithstanding anything else herein to
the contrary, in lieu of payment thereof by the Company, the Company may cause
any of its subsidiaries to, or Holdings, AMH or AMHI may, pay any Transaction
Fee payable to Harvest in connection with a Transaction; provided, that nothing
in this sentence shall affect the absolute right of Harvest to be paid such
Transaction Fee and the Company shall in all respects remain liable therefor
until such obligation is paid in full. The Company may agree to pay Harvest a
fee in connection with any other transaction, including without limitation, an
acquisition of capital stock or assets of another person or entity, so long as
such fee is approved by a majority of the members of the Board of Directors of
the Company other than the Harvest Directors.
(c) Concurrent with, and as a condition to, the closing of any
Business Combination or Asset Sale involving the Company, the Company shall pay
to Harvest, in a lump sum payment, an amount equal to the aggregate Harvest Fee
which would otherwise be payable by the Company through the completion of the
then-remaining Initial Term or Renewal Term, as the case may be. Notwithstanding
anything else herein to the contrary, in lieu of payment thereof by the Company,
the Company may cause any of its subsidiaries to pay the amount of any Harvest
Fee payable to Harvest pursuant to this Section 3(c); provided, that nothing in
this sentence shall affect the absolute right of Harvest to be paid such Harvest
Fee and the Company shall in all respects remain liable therefor until such
obligation is paid in full.
(d) In addition to the fees to be paid to Harvest under Sections
3(a), 3(b) and 3(c), the Company shall pay to, or on behalf of, Harvest,
promptly as billed, all reasonable out-of-pocket expenses incurred by Harvest in
connection with the Director Services and the Harvest Services rendered
hereunder. Such expenses shall include, among other things, reasonable fees
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and disbursements of counsel, travel expenses, messenger and duplicating
services, facsimile expenses and other reasonable and customary expenditures.
(e) In addition to the fees otherwise payable hereunder, in
consideration of the Director Services provided to the Company by any Harvest
Director who is not an employee or director of Harvest, the Company shall pay
reasonable and customary director's fees to such Harvest Director, in addition
to reimbursing the reasonable out-of-pocket expenses (including, but not limited
to, travel expenses) of such Harvest Director.
(f) Notwithstanding the foregoing, if the payment of an amount in
respect of the Harvest Fee would result in a breach or event of default pursuant
to an instrument of indebtedness to which the Company is a party (the
"Indebtedness") such payment shall not be paid to the extent that the payment of
such amount would result in such breach or default, but instead shall be accrued
on the books of the Company and shall bear interest at 8% per annum and be
payable as soon as and to the extent permitted by the terms of the Indebtedness,
together with interest thereon as aforesaid. The Company covenants and agrees
that it shall not agree to an amendment of the terms of the Indebtedness which
would specifically prohibit the payment of the Harvest Fee hereunder or impose
any higher financial test ratio or other pre-condition more onerous that any
terms of the Indebtedness in effect on the date hereof. The Company covenants
and agrees that, in the event that it incurs additional indebtedness, it shall
not grant in favor of the holders of such additional indebtedness a covenant or
right specifically prohibiting the payment of the Harvest Fee hereunder or
imposing any higher financial test ratio or other pre-condition more onerous
than is applicable to the Indebtedness.
4. Stock Options. Harvest and employees of Harvest shall not be
eligible for any grant of stock options by Holdings, AMH, AMHI or the Company
for the duration of the Initial Term and any Renewal Term.
5. Term. (a) The term of this Agreement shall commence on the date
hereof and shall terminate upon the earlier of (i) March 31, 2007 (such period
being referred to herein as the "Initial Term"), unless this Agreement is
automatically renewed as provided below in this Section 5, (ii) the date on
which this Agreement is terminated for cause as provided in Section 7 below and
(iii) the closing of any Business Combination or Asset Sale involving the
Company. Notwithstanding the foregoing the term of this Agreement shall
automatically and immediately be extended for additional one-year periods (each
such period being referred to herein as a "Renewal Term") if written notice of
termination of this Agreement has not been given by Harvest to the Company at
least three (3) years prior to the end of the Initial Term or, as the case may
be, a Renewal Term.
(b) Notwithstanding anything to the contrary contained herein, the
obligations of the Company set forth in Sections 3(b), 3(c), 3(d), 3(e) and 8 of
this Agreement shall survive termination of this Agreement.
6. Right to Engage in Other Activities. The Director Services
provided herein are not to be deemed exclusive. Nothing contained herein shall
restrict Harvest or any of its shareholders, directors, officers, employees or
agents from engaging in any other business or devoting time and attention to the
management, investment, involvement or other aspects of any
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other business, including becoming an officer or director thereof, or rendering
services of any kind to any other Company, firm, individual or association.
7. Termination for Cause. This Agreement may be terminated for cause
by the party whose conduct is not the cause for such termination if (a) either
party materially breaches its obligations as set forth herein (which, in this
case of Harvest, should be terminated for willful misconduct or gross
negligence), or (b) either party files a voluntary petition in bankruptcy or is
adjudicated as bankrupt or insolvent, or such party files a petition under any
chapter of the United States Bankruptcy Code or any other present or future
applicable Federal, state or other statute or law regarding bankruptcy,
insolvency or other relief for debtors, or any party seeks, or consents to, or
acquiesces in the appointment of, any trustee, receiver, conservator or
liquidator of itself or of all or any substantial portion of its property.
8. Indemnification. The Company shall (i) indemnify Harvest, its
affiliates, and their respective partners, directors, officers, employees,
agents and controlling persons and their respective affiliates, and any Harvest
Directors (collectively, the "Indemnified Parties"), to the fullest extent
permitted by law, from and against any and all losses, suits, proceedings,
demands, judgments, claims, damages and liabilities, joint or several, to which
any Indemnified Party may become subject, caused by, related to or arising out
of the Director Services or the Harvest Services or any other advice or services
contemplated by this Agreement or the engagement of Harvest pursuant to, and the
performance by any Indemnified Party of the Director Services or the Harvest
Services contemplated by, this Agreement, and (ii) promptly reimburse each
Indemnified Party for all costs and expenses (including reasonable attorney's
fees and expenses), as incurred, in connection with the investigation of,
preparation for or defense of any pending or threatened claim or any action or
proceeding arising therefrom, whether or not such Indemnified Party is a party
and whether or not such claim, action or proceeding is initiated or brought by
or on behalf of the Company and whether or not resulting in any liability.
9. Limited Liability. The Company agrees that no Indemnified Party
shall have any liability (whether direct or indirect, in contract or tort, or
otherwise) to the Company, holders of its securities or its creditors related to
or arising out of the engagement of Harvest pursuant to, or the performance by
any Indemnified Party of the Director Services or the Harvest Services
contemplated by, this Agreement, except to the extent that any loss, claim,
damage, liability, cost or expense is found in a final non-appealable judgment
by a court of competent jurisdiction to have resulted from Harvest's willful
misconduct or gross negligence.
10. Independent Contractor. The Company acknowledges that Harvest has
been retained hereunder solely as an advisor to the Company, and not as an
advisor to or agent of any other person, and that the Company's engagement of
Harvest is as an independent contractor and not in any other capacity including
as a fiduciary.
11. Information. The Company agrees to furnish or cause to be
furnished to Harvest all necessary or appropriate information for use in its
engagement and hereby warrants that any information relating to the Company or a
Transaction that is furnished to Harvest by or on behalf of the Company will be
true and correct in all material respects and not misleading.
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12. Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the prevailing party, as determined by the court, shall
be entitled to recover reasonable attorneys' fees in addition to any other
available remedy.
13. Assignment. Neither Harvest nor the Company may assign this
Agreement or any of their respective rights or obligations hereunder, except
that either of them may assign or transfer this Agreement to any other person
who or which acquires all or substantially all of their respective property,
business and assets, provided, however, that, in the case of Harvest, this
Agreement may be assigned or transferred, in whole or in part, to any affiliate
of Harvest, and thereafter references in this Agreement to "Harvest" shall
include such affiliate.
14. Severability. The invalidity or unenforceability of any provision
of this Agreement shall not in any manner or way affect any other provision
hereof, and this Agreement shall be construed, if possible, as if amended to
conform to legal requirements, failing which it shall be construed as if any
such offending provision were omitted.
15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED
AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO THE CONFLICTS OF LAW PRINCIPLES THEREOF.
16. Entire Agreement. This Agreement constitutes the entire
understanding of the parties hereto with respect to the subject matter hereof.
17. Binding Nature. Subject to the restrictions on assignability
contained herein and the rights and obligations of the Indemnified Parties under
Sections 7 and 8 above, each and all of the covenants, terms, conditions,
provisions and agreements herein contained shall be binding upon, and inure only
to the benefit of, the parties hereto and their respective successors, heirs and
permitted assigns.
18. Amendment, etc. The provisions of this Agreement may not be
amended, waived, modified or changed except by an instrument in writing signed
by all of the parties hereto. No waiver of any breach or condition of this
Agreement shall be deemed to be a waiver of any other or subsequent breach or
condition, whether of like or different nature.
19. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which, when taken
together, shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have caused this Amended and
Restated Management Agreement to be executed by their representatives thereunto
duly authorized on the date first above written.
HARVEST PARTNERS, INC., a New York
corporation
By:
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Name:
Title:
ASSOCIATED MATERIALS
INCORPORATED, a Delaware corporation
By:
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Name:
Title:
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